Factory Output Dropped 0.2% in July

WASHINGTON--U.S. industrial output fell in July, as the manufacturing sector continued to struggle with trade-related headwinds.

Industrial production, a measure of factory, mining and utility output, declined a seasonally adjusted 0.2% in July from the prior month, the Federal Reserve said Thursday.

Economists surveyed by The Wall Street Journal had expected a 0.1% increase last month. June industrial production was revised to an increase of 0.2% from an earlier flat reading.

From a year earlier, industrial production rose 0.5% in July.

Manufacturing output, the biggest component of industrial production, fell 0.4% in July from a month earlier. That helped tug down broader output across factories, mines and utilities last month.

The manufacturing industry's output accounts for about 75% of the nation's total industrial output. The Fed said manufacturing output has fallen more than 1.5% since December 2018.

Capacity utilization, which reflects how much industries are producing compared with what they could potentially produce, dropped by 0.3 percentage point to 77.5% in July. Economists had expected 77.8%.

Utility production rose 3.1% last month, reversing a sharp decline in June. Thursday's report showed output in the volatile mining sector fell 1.8% in July, which the Fed attributed a temporary decline in oil extraction in the Gulf of Mexico caused by Hurricane Barry. The mining index, which includes oil and natural gas extraction, was up 5.5% from a year earlier.

Weakness in manufacturing output aligns with a gloomy economic outlook, although the broader economy remains supported by a low unemployment rate, rising incomes and robust consumer confidence.

Economic growth slowed but still grew at a solid clip in the second quarter as strong consumer spending offset a drop in business investment.

American shoppers continued to spend strongly at the start of the third quarter, providing a source of fuel for the economy at a time of heightened global uncertainty. Retail sales climbed a seasonally adjusted 0.7% in July from a month earlier, well above economists' expectations, the Commerce Department said Thursday.

Still, the factory sector is struggling with weak global growth, uncertainty over the trade situation and a strong dollar that makes American exports more expensive.

An index of factory activity produced by the Institute for Supply Management fell to 51.2 in July--its lowest reading in nearly three years--from 51.7 in June.

Though manufacturing accounts for a small share of gross domestic product, the sector is highly sensitive to shifts in global demand, making it a bellwether for the broader U.S. economy.


  (END) Dow Jones Newswires
  08-15-19 0930ET
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